Mobility Mondays

Our Global Mobility experts recognise the complexities faced by organisations and employees.
Our focus is to simplify. 

Global Mobility has been referred to as the decathlon of HR/Reward. So many technical disciplines have to collaborate to deliver the right employee experience, compliance and cost management. There is a lot of technical jargon in the area and we would like to demystify some of this.

We would welcome your input including any issues you would like us to cover.

Issue of the week

Permanent Establishments

Dinesh Jangra, Crowe LLP UK

Monday 20 May

Perhaps of all the ‘tax’ compliance related risks those involved in mobility come across the Permanent Establishment (PE) risk is maybe the least well understood. This article should help in changing that. 

For a number of reasons, PEs are ever more in focus at tax authorities at local and international levels and therefore represent a high risk. In addition, more informal and fluid employee mobility that is a feature of the times now can result in more PE risk.

Those involved in global mobility can play a key role in the identification of the issue. As such, a high level understanding is key to enable global mobility professionals to assist organisations in the successful management of related risks.


Before we get into what PEs are let’s look at the backdrop against which they may appear.

Those involved in employee mobility will be well aware that globally mobile employees can result in changes to tax related compliance obligations for the employees and for the organisation. As examples, employees may have changing or new tax filing and payment obligations and the organisation itself may have new and more complex payroll deduction and reporting requirements. 

Obligations for the employer organisation can exist in the home and host location organisations. Although the home and host organisations or entities may well belong to the same global group they are usually regarded as being independent by tax authorities. These entities have obligations of their own to tax authorities under corporate taxes. Just as employees can trigger tax implications through their presence or residency in a country so can these corporate entities.

The PE issue relates to the home employer organisation. In the context of global mobility it is a taxable presence of the home employer (for corporate taxes) in the host country caused by the presence and activity of the employee or a group of employees over time.

What types of employee mobility are highest risk?

In theory, any kind of employee mobility scenario can give rise to a PE risk in the host country.

That said, a lower risk scenario is where an employee is sent from one entity (home entity) on a formally documented secondment/assignment to the host entity and all the duties that then follow are performed for the host entity only. Not all employee mobility fits this scenario. As a result, the follow types are among those that require attention.

• Employees working in a country where the employer and/or group has no corporate presence at all.

• Business visitors.

• Multi country or regional roles.

• Senior executives or management who perform duties outside the country in which their employer or organisation is desired to have a corporate presence.

• Commuter roles.

• Assignees/secondees who do not work exclusively for the host entity alone.

• Employees who work from home offices, or other (none office) places of work.

What are the implications of a PE?

Unexpected costs, management time and effort and reputational risk can follow when employees create a taxable presence of the home employing company in the host country.

Where this occurs, the employing company (home employer) can (unknowingly) become liable to foreign corporate taxes in respect of the profits that relate to the overseas activity. In addition, foreign tax filings can be triggered and require attention.

Unfamiliarity with local tax law and compliance requirements in the foreign country can make this a difficult process to manage (or to even identify in the first place).

The cost of non-compliance with corporate related tax obligations in the foreign country can become significant with the addition of interest on unpaid tax and related penalties. These costs can quickly rise again if there are a number of years or even multiple countries involved. As well the tax dues, corporate taxes related registrations, tax returns and other filings can also be required.

Alongside considerable management time and energy that is then required to put things right there can also considerable professional advisor costs related to bringing the compliance up to date. At the risk of stating the obvious, this can all come as a nasty and costly surprise to the business.

What gives rise to a foreign taxable presence?

The existence, or not, of a PE in a foreign country is often difficult to determine as the rules are complex and their interpretation is frequently subjective.

Consideration should be given to the risk of creating a foreign taxable presence whenever employees are globally mobile. Issues to be considered should include:

• What activities the employees will be performing and in respect of whom whilst working abroad?

• What is the nature and location of the “operational base” where the work will be performed?

• What management authority or capacity do the employees hold?

• How many employees are being sent abroad to work on a particular project or over a period of time?

• How long will they be “in territory” individually but also collectively?

• How are employees representing themselves on business cards and letterheads, what addresses do they use and which employer appears on them?

Situations which may give rise to a taxable presence in a host country when employees are globally mobile include:

• The creation of an office (even at the customer site) to service local customers or clients.

• The creation of a manufacturing or servicing facility.

• Sending engineers to service / repair / install a customer’s production facility over a period of time.

• Conducting marketing research / gathering market intelligence for third party clients.

•  A common scenario which can potentially give rise to a foreign taxable presence arises where a salesman or sales team has the ability to conclude sales contracts in a foreign country.

The phrase “the ability to conclude sales contracts” is often difficult to interpret. The concept of ‘concluding’ in this context is not limited to the act of just physically signing a contract but also includes the negotiation of contract terms leading up to the formal signature. This can be the case even where the contract is referred back to Head Office for ‘rubber stamping.’

If a foreign taxable presence is created, it will then be necessary to determine the profits on which corporate tax is payable in the foreign country. 

In recent years, many countries have developed steps to counter international tax avoidance which will make it more difficult to avoid the existence of a taxable presence in a foreign country.


PE isn’t always the best understood risk in the area of employee mobility – a high level understanding, however, is a must.

Those involved in global mobility are often in a unique position to spot that the issue may exist in a particular work arrangement or project. Once identified, close collaboration is required with the Finance and/or Tax department of the organisation to understand how to assess and best manage.

Proactive management is key. With careful review and planning, it can be possible to avoid a PE in a particular country through reviewing what duties are performed and not performed there. Equally, if a PE is to be created then getting ahead to enable timely compliance can bring with it much reduced costs and management attention than when compared to a non-compliant scenario.

Three key steps to keep front of mind:

•  Identify and monitor relevant employee staff visits and their duration.

•  Identify the nature of the activity which is to be undertaken abroad.

•  Assess whether there is a risk of creating a foreign taxable presence and whether this can be mitigated or proactively managed for compliance.

Previous issues answered

Net to Gross Calculation - Gerardo Mendoza, Crowe - Mexico

Net to gross calculations are often referred to when mobility interfaces with Finance and/or payroll. 

As these terms are not part of everyday language there can be a bit of mystery around them. That said, they are important concepts to understand to enable the business to make the right provision or accrual for the costs of globally mobile employees. After all, nobody likes cost surprises. Equally, most tax authorities require reporting through payroll or tax returns of the gross compensation. So for compliance it’s important to know the gross amount.

Net to gross calculations are also important from a compensation and benefits perspective. 


Critical to understanding this area are some crucial terms - and net Gross is the amount of pay before taxes are deducted. Net is what's left after taxes are applied/deducted. From a finance perspective the gross is the cost to the business and the number that probably needs to be reflected in payroll reporting.


When organisations look at compensation in the context of employee mobility two key concepts have to be thought through.

  • The first is what do we pay the employee - what is the right salary?
  • The second is what is the impact of tax changes between countries and how does that impact what the employee would really receive after taxes?

As a result of thinking through these concepts organisations often decide that the employee should receive a net pay entitlement. In other words, a certain amount of compensation after taxes (a net pay scheme).

Net pay schemes

The net to gross calculation is a sort of backwards tax calculation.

Rather than starting with gross pay and deducting taxes, the starting point here is the net pay. For example an organisation may establish the employee should receive EUR 4,000 a month after taxes. To process the payroll and understand the real cost they need to understand real gross compensation. The net to gross calculation establishes what gross would be needed to deliver the EUR 4,000. This could look as follows:


Gross compensation

Income tax

Social Security

Net compensation


- 4



The business and the payroll now understands the amount to report and accrue for costs is 10.

These calculations are not straightforward and usually require some expert support because (amongst other things):

  • The payroll system can’t always do this backwards calculation from a capability perspective. Globally mobile employees can be a very important employee subset but are usually small in number and payroll is set up for the rest, the vast majority of the employees who are paid gross.
  • Equally, the local tax system may have a number of deductions, exemptions or tax reliefs that have to be applied and these can often vary at an individual level. The tax residency and status of the individual has to be determined.
  • The calculation involves 'grossing up'. As the taxes due are actually payable by the employer, they then constitute further compensation on which tax is then due - the tax on the tax conundrum.
  • Often, the taxes due are not due just in one country and are not just of one sort (social security taxes as well as income taxes may apply.


Alongside cash globally mobile employees often also receive benefits such housing, medical, education and allowances. They may also continue to participate in pensions etc. in their home country. These benefits may also be taxable in the new country in which they are working so it is necessary to understand what the true cost of delivering these benefits actually is (again, so that right cost accrual can be made). Here again, a net to gross calculation can be prepared to understand the total cost to the employer (inclusive of taxes).

Employees don't expect to pay the tax on assignment benefits or pay tax on compensation that is not taxable in their home location but is in the host. This extra cost usually passes to the employer.

Target nets

A final common use of net to gross calculations can be in the compensation and benefits area. It can be relevant where employees are moving on a local to local basis. In these examples, the employer or employee has a target net in mind (after taxes) and needs to understand what the gross should be. Again, it’s a sort of backwards calculation.

The different between this and net pay schemes (above) is that no grossing-up is needed as the employee is paying the taxes due themselves.


Net to gross calculations play an important role in cost management and compliance in relation to globally mobile employees.

They can be technically difficult to perform but once done provide important management cost information for the business.

These calculations can be an important input and part of assignment costings which can be used to get approval for an assignment to go ahead from management.

The net to gross calculation establishes which compensation or benefits items are taxable and which are not. This leads to good questions like can similar value to the employee be delivered in a way that isn’t taxable to the employee or perhaps taxable in a more favourable way. This is the starting of tax planning and can be a real game changer from an assignment cost reduction perspective.

Gerardo Mendoza
Gerardo Mendoza
Crowe, Mexico


Business Travellers - Dinesh Jangra, Crowe UK

Business travellers are a real hot topic in Global Mobility, HR and Tax. As it is a hot topic, it is essential that those involved in employee mobility understand the key issues. 

Why is knowledge of this area important?

The business will often turn to those handling employee mobility to lead and guide them on how to manage business travellers (whether or not they are formally part of their remit). This is because key to successfully managing the issues is the technical knowledge, process and policy expertise that supports general employee mobility. Those who handle employee mobility may want to consider proactively volunteering to define and co-develop how to manage business travellers. This way, they get to influence and co-design the process and ensure it does not create unnecessary extra process or workloads. 

What are business travellers?

Organisations will have employees who are on assignments, secondments or other forms of structured employee mobility such as commuters or local transfers. The structure that supports these moves will usually result in some compliance steps that assess and manage immigration, payroll, social security and tax obligations. Typically, for these moves someone in the organisation with the right experience and the right knowledge is involved. Business travellers can be very different.

Business travellers are the informal employee mobility in an organisation. This travel happens organically as and when the business requires it. It can range from a single business trip to an ongoing project in a new location or even a change in role where the employee is regularly required to work elsewhere (for example a regional role or an appointment to a Board in another country). These cases are not always managed by those managing the formal mobility in an organisation so this creates real risks for the business.

I would say business travel risks also exist in formal mobility scenarios. I call this the third country workday scenario. For example, say there is an assignees who has been sent to work from the U.K. to South Africa. Due to an opportunity or project the assignee starts to spend time working in Kenya. Kenya is a third country and care is needed to check what compliance obligations there may be there because the structured focus may very well be only on the home and host (UK and South Africa).

Why are business travellers a topical issue?

This is partially because there is a real focus on this area in payroll audits - a trend that is rapidly gaining momentum globally. Another reason it's topical is because tax and fiscal authority audits are leading to actual fines and reputational damage. Some well-known organisations have been fined in this area in a number of countries.

New ways of working and technology are enabling work anywhere options. With such flexibility comes added risk as where work is physically performed can get disconnected from the country of employment and payroll.

What obligations and risks are associated with business travellers?

This could easily be a very long list. Overall, it is all about cost, compliance and business disruption.

I usually think about the considerations in three broad buckets. 

Tax matters: Is payroll reporting required? Where is social security due - how can dual liabilities be avoided? What tax filings does the employee have to file? Is the employee giving rise to a presence in the other country that could trigger corporate or sales tax obligations? Are business travel and accommodation costs taxable - are there surprise extra costs here?

Legal matters: Does the employee hold the right work permission/ visa to legally work in the new location? Are there any reporting, registration, notification or compensation payment obligations under local rules and the Posted Worker Directive in Europe? Can the employee acquire rights under local labour law - how can this be mitigated?

Operations, welfare and wellbeing: What additional payroll processing and reporting complexity is there - can the systems cope? What disruption to clients and customers and ultimately the business is there if the employee is refused entry or denied departure? Can you quickly identify where employees are in the case of an emergency? Do you know the impact continuous and extended business travel is having on employee wellbeing and welfare?

Why are business travellers challenging?

Technical issues often need bespoke analysis at an individual level across areas like immigration, tax, payroll, tax, employment law and social security. The following are also real hurdles to cross;

Fluidity: The challenge around managing business traveller risks is strongly connected to the fluid nature of those undertaking business travel. A business trip or two can quickly become an extended work period that triggers compliance. If you don’t have reliable start and end dates how you can assess compliance? How do you know a person actually came back and when? There could also be gaps between trips but to assess compliance you have to count all previous trips - how do you get this data?

Ownership: Organisations do not always find the business traveller issue drops nicely into a single function or team remit. This means that cross function communication and collaboration is key to identify owners and stakeholders. This can be a complex and time consuming process. 

Reactive approaches: I often hear that organisations don’t feel action is needed because nothing has gone wrong. I would always add ‘...yet’ on the end. The mindset should be around proactively preventing issues rather than mining for issues or waiting to fix them once they’ve occurred. This is a real issue because securing spend to invest in managing the issue is not easy if nothing has ever actually gone wrong...yet. 

Data and process: Managing the issues will often have dependencies on good, clean and reliable travel data, collaborative travel providers and systems and good process across jurisdictions. This simply isn’t how the status quo may be - so taking action becomes difficult whilst risk mounts up. 


Awareness of the issues and recognition of them is a key first step to managing business traveller risks. Those managing mobility manage similar risks in more structured scenarios so have the expertise to be real leaders in this area and shape how organisations respond.

Some key actions could be:

  • size the issue - how prevalent is it - what’s at stake? Does the risk indicate action is required?
  • clarify ownership- who needs to be involved and who needs to be consulted? Most importantly, who will drive it?
  • review process and technical solutions - what technology and external support is needed? Understand total costs of ownership. There are lot of business traveller tracking tools on the market. Recognise that the cost and effort needed in implementing a system is part of the overall investment or annual cost. A system may now identify new compliance requirements - tax returns, payroll set ups, certificates of coverage, immigration applications and so on. It's important to understand and factor in these downstream costs too so the business has the complete picture in terms of cost and resource requirements.

Dinesh Jangra

Crowe LLP
United Kingdom




Shadow Payroll - Dinesh Jangra, Crowe UK

Shadow payrolls are a key concept for those involved in mobility to become familiar and comfortable with.

They are an essential mechanism through which payroll compliance is delivered. An understanding of why they are used is essential so that those managing mobility can partner with the business to ensure it remains compliant and explain how process will work.

Increasingly, fiscal authorities are very well aware that globally mobile employees receive compensation from a number of sources (which makes compliance more complex) so this is often an area of specific scrutiny in payroll audits.

When might a shadow payroll be required?

The scenario that gives rise to a shadow payroll is usually as follows:

  •  An employee is working in, or is assigned to a new country or even state.
  • They continue to be paid, ‘on payroll', in their home location. However, a payroll obligation for the employer is triggered in the new country or location.
  • A solution is now needed to ensure the employer can meet its obligations in the new location - that solution is usually shadow payroll.

What is a shadow payroll?

Essential to understanding what shadow payrolls are is reflecting upon what role traditional payrolls perform first. A payroll probably performs five key functions:

  1. Pays the employee money into their nominated bank account
  2. Determines and deducts tax and social security amounts due by the employee
  3. Determines the employer payroll taxes due - for example employer social security
  4. Reports wages, taxes and social security to the local tax/ fiscal authority - employer then pays these over
  5. Provides a mechanism to maintain participation in certain benefits (for example - pension).

A shadow payroll is used in a country where there are payroll obligations (B, C and D above) but either no payment is made locally or only part of the overall payment to the employee is made locally. Often no payment is made so is for this reason the terminology 'shadow' is used, it’s not a real payroll as no payment is made but tax reporting and payroll taxes compliance is delivered. Essentially what has happened is we’ve recognised that the physical payment (A above) and the compliance aspects (B,C,D) can be split.

What should shadow payroll include?

Critical to getting the shadow payroll right is the visibility and flow of global compensation. Globally mobile employees could be being paid by their employer in two countries and often other compensation items are provided by or delivered through third parties (relocation and destination services providers).

The starting point for shadow payroll should be all global compensation (regardless of who paid it and where) and then based on the individual employee tax status some or all of those items may be subject to tax and social security deductions, taxes and reporting.

Shadow payroll delivery can be a highly complex area of mobility support because it requires optimised compensation data flows, cross border tax technical knowledge but also because it is payroll there are often tight deadlines to regularly meet. Often, this support is outsourced by organisations.

The shadow payroll is required only in the host country, right?

I'd love to say it was that simple but the reality is the answer is it is probably required in both locations.

The shadow payroll in the host would be the 'new' payroll but some 'shadow' type adjustments are probably required in the home country too. Let me explain using an example:

  • The overall compensation package for a globally mobile employee is usually higher than the normal stay at home compensation. For example extra allowances and benefits may being delivered.
  • These allowances and benefits may be being paid elsewhere (so not through the home payroll). However, this extra compensation is still subject to employer and employee social taxes and/or wage taxes.
  • If the overall package was say US$200k but only US$120k was being paid through the home payroll then the additional US$80k now needs to be reflected for compliance through the home payroll.

Complications and challenges

To be truly compliant, there is often a need to provide the overall global compensation picture to each country each month to calculate the right payroll taxes due.

The problem is the payroll taxes themselves can actually constitute compensation so there now has to be some method to connect the home and host payrolls. For example the payroll taxes due in host on the shadow payroll are subject to home country social security. This can be a real challenge purely from a data and timing perspective.

Another challenge is the multiple of different sources of compensation -home and host payrolls, home and host expenses and benefits, relocation and destinations services. There has to be a good process to globally accumulate all of this compensation to enable the correct reporting.

Once collated, the compensation has to then be analysed to check what items are subject to tax and social security deductions, taxes and reporting. Often, the answer here is very much dependent on the country combination and the individual tax status of the employee.

I won't go into detail on the next challenge which is grossing up of compensation. This effectively means the shadow payroll has to be operated on basis that the employee is on a net pay scheme so the payroll has to perform net to gross calculations. Often I find this is not a calculation the payroll system was designed for. Therefore, the can be significant complexity at the payroll operational level too. 


Shadow payrolls play a very important role in enabling employers to be globally compliant in respect of mobile employees.

Critical success factors to facilitate a good process that doesn't become overly expensive or burdensome are technical know-how, data and process management. If these areas are not addressed, compliance can be a challenge and the burden in terms of workloads for Mobility, HR and Tax professionals can quickly reach unexpected and undesired levels.

Dinesh Jangra

Crowe LLP
United Kingdom 



Double Tax Treaties - Sivakumar Saravan, Crowe - Singapore  

Those managing and involved in global mobility will be well aware that employees working in new locations result in changes to compliance obligations for both the employee and the employer. Understanding these changes and managing them is key in managing mobility related risk. Double tax treaties play a role in establishing some criteria that can reduce the complexity and compliance obligations in short term secondments and assignments. As such, an understanding of how they work at a high level is essential. Double taxation treaties are often referred to as Double taxation agreements and tax advisors often also refer to them as DTAs and DTTs. 


A Double Tax Treaty is essentially an agreement between two countries which has an overall goal to avoid taxation of the same income twice (double taxation). Double taxation would be an issue for employees since it could significantly alter their net pay after tax and result in significant extra costs for employers.  These agreements are also commonly referred to as ‘double tax agreements’ or simply ‘tax treaties’.

Each country has their own tax system and their own tax rules (domestic rules). Tax Treaties sit across the top of these domestic rules and can override them. In addition to eliminating double taxation, tax treaties also facilitate the exchange of information between tax authorities and provide the framework to prevent tax evasion and the resolution of disputes between countries (for example - which country should tax which income or gains when both technically can do so under their domestic rules). 

To eliminate double taxation, tax treaties provide different rules for different types of income and receipts such as capital gains. They provide for the allocation of taxing rights between countries. However, tax treaties do not create a tax liability if under the domestic tax law of a country a liability does not exist. 

Countries normally use model tax treaties as a framework for negotiating, concluding and revising tax treaties. A model tax treaty is provided by the Organisation for Economic Co-operation and Development (OECD). The model tax treaty is widely used in negotiations by both member and non-member OECD countries. 

How are Double Tax Treaties used in practice?

The countries of the world do not have a uniform tax system. For example, some countries tax income that relates to that country and others tax all income, regardless of where it arises.

As a result, you can have employees who are resident in the country in which they are employed (country 1) but are required to travel to other countries (country 2) to perform work. Those duties in the other country could then be taxable there. The result, there can be taxation on the same income in both countries. 

Where there is a tax treaty between the two countries this double taxation could be eliminated provided certain conditions are met. This can result in no income tax in country 2. This is normally only applicable in the course of short periods of work such as projects. Where income tax in country 2 can’t be eliminated (because the conditions are not met) then the same treaties can provide the basis for a tax credit - effectively meaning tax is not paid on the same income twice. 

Countries usually need to connect an individual to its tax system before it can tax them - otherwise everyone would be taxable everywhere. Tax residency is usually a key connecting factor - others include nationality or immigration status (as is used by the United States). In cross-border employment scenarios it is not that uncommon that an employee will become resident in two countries. When this happens it is necessary to apply residency tie-breaker rules to determine where the individual is resident in order to apply the provisions of the tax treaty.


Global mobility professionals and those involved in managing cross border employees work require a high level understanding of tax treaties. The rules in those treaties can simplify or reduce compliance in situations where employees are working for a relatively short period in other countries for example less than 183 days (although there are other conditions to be met and exceptions such as Directors and Economic Employers to check). 

The key point when managing cross border employees is to work with the business to highlight if managing the employees’ presence in a country as well as the finance set up (which country bears the costs for the employee) can reduce compliance and related costs that often the business would not have built into the overall project.

Sivakumar saravan
Sivakumar Saravan

Crowe, Singapore



Non-resident directors - Mark Verbeek, Crowe Spark - Brussels

Human Resources and Mobility professionals can come across employees who have Directorships. These types of employees can very often give rise to different kinds of compliance and reporting obligations. As these employees are often senior, it’s all the more critical to identify payroll and reporting obligations early. The very nature of their roles means their appointments are matters of public record and can be easily uncovered by fiscal and tax authorities. This makes them a particularly risky group of employees. 


Often global and multinational groups and businesses operating all over the world, will have local companies or entities in different countries. It is not uncommon that these local entities then have Directors who do not live that country - Non Resident Directors. These Directors are appointed either because HQ wants to retain some oversight and operational control or because they have specific skills and knowledge that are crucial to the successful operation of the business locally.


The key thing here is that exemptions that may apply for normal employees may not work. The commonly known 183 days rule doesn’t always stop payroll or taxation for Directors. Here is why. The basic principle is simple and laid down in Article 16 of the OECD Model Tax Convention (that regulates and influences how countries tax) stating that:

"Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State."

This means that a director is taxed in the country where the company for whom he performs his Directors duties is situated. Physical presence in that country (by the Director) may not even be required.

In practice however the practical application of the relevant rules vary from this simple starting point. These variations can result from:

  • the nature or legal form of the companies concerned
  • the nature of the duties/ roles exercised: directors, liquidators, persons with ‘similar functions’, leading functions of day to day management or of a commercial, technical or financial nature,
  • whether the Director is treated as employed or self-employed under local rules.

In respect of the final point, there is often a misconception that someone who deals with the day-to-day management must be an employee, whereas in practice this is not the case.

To complicate things a little more, there may be a need to establish what compensation relates to specific Directors duties and what compensation relates to general duties performed in the country - the tax / payroll treatment may be different.

As a result, tax technical analysis is recommended to verify the applicable domestic and relevant double tax treaty rules.

It should also be noted that when a non-resident director is taxed in the country where the company is established, it is possible that they will also be taxed in their home county. Double taxation may apply and this will be need to be resolved.

Social security  

Social security is a key cost and payroll related tax for employees and employers. For social security purposes, contributions in principle need to be paid in the country where the duties are performed.  

In the case of non-resident directors, we quickly find situations of simultaneous duties in two or more countries. The question then arises under which social security system the does the director fall?

Within Europe, the cross border social security rules need to be analysed to determine where (in which country) contributions are due. 

Other bilateral agreements between countries can also regulate where contributions are due. 

However, in case there are no agreements between the countries where the director performs their duties, it is possible that the director (and their employee) will need to pay social security contributions in two (or more) countries. This can result in duplicate costs and additional compliance reporting. 

Labour law

Consideration should also be given to local employment/labour law. A Director may require a specific local form of Directors service agreement that requires specific local clauses or obligations. This should not be overlooked. 


Non-resident Directors represent a highly visible but complex class of employee for compliance. They are often senior executives, well compensated and therefore present a high risk. 

Most HR and mobility professionals will want to ensure that this class of employee is compliant in all locations they are working. Key to this is understanding the different issues involved and working with the business to ensure they are reviewed with experts and any arrangement is compliant and cost effective. 

Mark Verbeek
Mark Verbeek

Crowe Spark, Brussels



Posted worker directive - Raphael Gaudin, Curator & Horwath AG Zurich - St. Gallen 

When managing and dealing with globally mobile employee there are lots of technical areas to consider - payroll, double taxation, tax equalisation, social security insurances and visas to name only a few. These are commonly in focus in the minds of mobility professionals. Increasingly, knowledge of and compliance with labour law is a very important part of the job too. Non-compliance can lead to penalties or even a ban from working a country. The consequences can be very serious. The posted worker directive is a cross border labour law consideration. As it is a directive, the implementation of it is slightly different at each country level. Local legal and practical knowledge is therefore really key.


Within the EU / EFTA, access to member state markets is a key and fundamental concept. Posting (or sending) of workers from one state to another is major part of this system. If the laws of the country where the work is actually performed would be applicable in every case, company postings to other member states would require knowledge about labour law of many member states. This would in turn hinder companies from realising the benefits of the free market. In order to avoid such difficulties the EU has developed a free movement of workers agreement according to which the regulations of the home country remain applicable in cases of a project/ posting  of limited duration in another member state (including EFTA and Switzerland).


Generally, we have to separate local employees from posted workers. A local worker/employee  is a mobile worker who enters into an employment agreement in the host country and becomes subject to local labour law and the social security system.

In contrast, a posted worker is an employee sent by his employer to carry out his work in another state for a limited period of time. For example on inter-company assignments or project related work. Based on free movement of workers agreements, posted workers remain under the labour law of the home country and are not governed by the labour law of the host country.

Since member states do have different minimum standards in terms working conditions, this system presents a risk that the posted worker is not on favourable or comparable terms when compared to local workers.  A separate issue is that local companies may not able to be compete with foreign companies operating with posted workers because there are vastly different costs or obligations. For that reason the posted worker directive was adopted in 1996 (96/71/EC). In addition, an enforcement directive has been implemented in 2014 and a revision made 2018.

The posted worker directive

The posted worker directive has the purpose of establishing a legal framework for workers being posted from one state to another state. It contains rules that govern the application of the labour law of the state where the work is carried out. The purpose of the directive is broadly that posted workers are treated comparably when compared to local employees.

The posted worker directive seeks to ensure the local labour market and posted workers’ rights are protected.  In practice, this is achieved by requiring the application of the main labour law standards in the host country to posted workers. It mainly covers the following areas:

  1. Working time (hours, holidays, pay)
  2. Standards applicable to agency workers
  3. Health and safety
  4. Pregnancy and maternity protection
  5. Discrimination law
  6. In the building and construction industry, collective labour/ bargaining agreements have also been confirmed as being applicable

A worker is posted from a French employer to carry out installation work in Switzerland. Although the French employment contract remains in place, a salary which is comparable to a Swiss market average comparable salary must be paid to the employee. If the salary in the home country is lower, the employee must be compensated for the difference between the French and the Swiss salary.

Hints and tips

Every member state has its own set of rules and implementation approach. 

To avoid labour law risk, penalties and business disruption, we strongly recommend that businesses take time to review how the posted worked directive has been implemented in the host country. Global Mobility professionals have a key role to play. 

It's important to also be aware the different minimum salary rates in various member states are a potentially significant driver of cost which must be evaluated before the posting of a worker; this must be part of the project calculation.

Global Mobility teams have an important role to apply to support their organisation in understanding and applying local regulations and help to avoid unexpected costs and risks associated with projects carried out in other member states.

Raphael Gaudin

Curator & Horwath AG
Zurich - St. Gallen 



Social Security in Europe - Roeland Esveld, Crowe Foederer,  Netherlands

Social security costs differ across Europe so it is vital that mobility professionals understand the basics of the cross border rules that apply so they can help their organisations stay compliant and avoid unnecessary cost, dual contributions and complexity.

Organisations often request employees to work across borders. In some scenarios the cross-border working arises due to the particulars of the employee rather than at the request of the business. For example, the employee may have relocated themselves to a new country but continued in the same role. In these scenarios employer and employee taxes and related payroll need to be reviewed. Social security is a key consideration. 

This week we will discuss the social security position in the EU area and the use of the so-called A1 Form. Common rules for what is known as social security coordination apply to EU member states, Iceland, Liechtenstein, Norway and Switzerland. Amongst the main purposes of the rules is the concept that social security contributions should be payable only in one country (at any given time). As a result, dual social security liabilities should be avoided.

What is an A1 Form?

The A1 form certifies which country social security rules or legislation (exclusively) apply to the holder of the form. This effectively confirms the country in which social security contributions are due.  The form will generally be needed in situations where a person has a connection with more than one EU-country, Iceland, Liechtenstein, Norway and Switzerland. 

The A1 Form is based on the rules contained within European Directive (883/2004) that provides the cross border social security coordination rules. This Directive not only deals with rules for employees, but amongst others also for self-employed persons, civil servants, benefit recipients, pilots/cabin crew etc. We will focus on the rules for employees.

Coordination rules that determine which country social security rules and legislation (and therefore social security contributions) apply:

The main rule (and starting point) for employees is that the social security legislation of the country where the work is performed is applicable. In special cases or when an employee works in more than one country, there are exceptions to this rule. I will highlight the most common ones.

  1. When the employee is sent by the employer to work temporarily in another country on his behalf for a maximum period (initially) of 24 months, the employee will remain subject to the legislation of the country were posted from.
  2. When the employee is performing duties in more than one country at the same time, or in alteration, then the employee will be subject to the legislation of the country of their residence provided that the employee works at least 25% of his time in his country of residence. If it is less than 25%, then the employee will be subject to the legislation of the country where the employer is located.
  3. As an exception, two or more of the involved countries may by common agreement determine that the employee will be subject to the legislation of the country other than that provided by the normal rules. The A1 form will confirm to which legislation the employee is subject.

Where and when to obtain an A1 form

If the employee goes to work temporarily in another country, the employer will normally apply for the A1 from the relevant authority/institution in the home country (country where sent from). Employees who normally pursue activities in more than one country, apply for the A1 in the country of residence. When an exception to the normal coordination rules is appropriate, the A1 application is made to the authority/institution in the country where the employee would like to be subject to the legislation. View a full list of competent authorities/institutions. Whenever possible, the application should be made before the duties begin in the other country. The legislation determined as being applicable on the Form A1 is normally binding on all countries. The Form should be retained and made available for presentation to the institutions in the countries the employee is working in.;

Payroll consequences

The Form A1 confirms the country in which social security is payable. The same form also acts as confirmation that social security is not therefore due in the country in another country the employee is working in.  This form is therefore a very important document to retain for payroll audits.In some scenarios the social security legislation applies in a country that is different to the country where the employee is employed and on payroll. In these scenarios, the employer will need to be registered and payroll deductions, payments and reporting will apply. It may well be that taxes (wage / payroll taxes) will have also have to paid (and potentially withheld via the payroll). This would mean that a split or shadow payroll may also have to be implemented. This is a topic for another Mobility Mondays write up.


It’s important for mobility professionals to understand the basic rules that apply in Europe. This understanding will help them ensure payroll compliance and prevent costly dual social security contributions. The rules and how they apply to the UK may change after Brexit.

Roeland Esveld

Crowe Foederer



Commuters - Dinesh Jangra, Crowe UK

I often hear organisations talk about how they opt for a commuter role rather than an expat or relocation move because it keeps things simpler.

This expectation however is often misplaced as commuter roles have the potential in some ways to be more complex from a compliance perspective (payroll, tax and social security). It’s important for Mobility / HR and Tax professionals to understand why so they can guide the business accordingly.

What is a commuter?

Let’s define what we mean by commuter. A commuter is an employee who lives in one country, is employed there but is required to work regularly in another country. There could be a weekly or a monthly pattern but what’s key is they are required to be outside their home country on a regular basis – it’s not just a business trip. No relocation is involved, the family, the family home and payroll remain in the home country.

For many reasons commuter roles have definitely been on the rise in recent years. Some of the key reasons include roles becoming more cross border in nature and the perception that commuter roles are viewed as cost effective alternatives when compared to expat roles. Brexit has been another trigger – presence is required in countries for regulatory reasons but the employee is settled at home (UK) so starts to commute.

Why can they be more complex?

To understand why a commuter can be more complex from a compliance perspective we probably need to understand why a typical expat assignment can be less so. In an expat scenario, or even a permanent transfer, there is usually a relocation. That relocation, family and home moving, often means the employee breaks tax residency in the home country. As a result, tax and payroll can over time primarily be a focus in the host country.

Commuters often stay tax resident in the home country – so there is payroll, income tax and social security potentially in both countries. Once worked through, cross-border social security rules can mean the social security is due in one country only but you are then still left with dual payroll and income taxes. The result is payroll gets very complex with specialist knowledge and adjustments being required to prevent double tax withholding and the income tax filings and liabilities for the employee get ever more complex.

The home country employer may also need to register in the host country for social security or payroll taxes. There are also related considerations around immigration, employment law, corporate tax permanent establishment and regulation such as posted worker directives to consider too. If that wasn’t enough to think about, it’s also necessary to check how travel, accommodation and subsistence costs are taxed in both countries. These are very often reimbursed or paid for directly by the employer so if they become taxable there can be hidden tax liabilities that can be unwelcome surprises and costs.

What tips are there?

There are solutions and methods to manage the complexities around payroll and taxes but early analysis is absolutely key. This way you can help the business understand the potential changes in obligations that can be triggered. The analysis may also help in identifying the compliance triggers in the host country, for example a certain number of days worked each year. The arrangement can then be structured or managed to either avoid tripping those triggers or at the very least the business is fully aware of what it is signing up for with the related additional complexity and costs.

Dinesh Jangra

Crowe LLP
United Kingdom 



US: State to state compliance - Gary Johnson, Crowe US

Intra-country mobility compliance

Mobility and tax professionals will be aware that as employees work across borders they may give rise to changes in compliance obligations such as payroll and income tax filings. What’s not always as well understood is that intra-country mobility can also do the same. Working in different places in the same country can change compliance obligations for the employer. In the UK, we have Scottish Income Tax as an example but the best example of this is probably the USA.

US state to state compliance.

The US Tax and payroll system works in two parts. There is Federal tax as well as State and Local Taxes often referred to as ‘SALT.’ If a domestic employee, or even a globally mobile employee, is working in more than one US city or state it can mean payroll and income taxes to those cities or states are triggered. Employers need a process to monitor where their employees are working to mitigate risk.

Employees working outside of their 'home state' can give rise to payroll related compliance challenges for their employers as well as personally add to their own individual tax compliance burden … with a need to file extra state or city income tax returns. These employees are 'non-resident' because although they work in one state they live in another. As businesses expand, using 'just in time' service delivery methodology and broaden the use of flexible work arrangements, the employers's vulnerability to payroll tax compliance gaps grow.

Why is State Payroll Tax so complicated?

Well, let's start with the 50 state jurisdictions plus the District of Columbia.D.C. does not tax non-residents and nine states do not impose individual income tax on wages  which leaves us with 41 state tax jurisdictions that apply their own sets of rules to non-resident taxation.

The rules then vary from taxation on day one as applied by 24 states … to taxation based on the number of days per individual, the number of days by legal entity or varying wage thresholds to be applied to an employee in a quarter or calendar year. Once you have these rules sorted out, we then have to consider the Reciprocity agreements between certain states to see if there is an overriding agreement  that presents taxation to the 'resident' or 'home' state.  Now that you get the gist of the rules, or at least how complex they can be – let’s look at implementation.

For a select few sectors that use time and attendance/ timesheet systems (like professional services) then perhaps daily physical work location details are readily available? If so, it’s then a matter of applying the rules for each of your employees. Alternatively, if the physical work location data does not exist, alternatives include employee self-reporting, analysis of preferred or travel suppliers’ data as well as GPS smart phone related apps that can help facilitate the process. Gather the data, apply the tax rules and then integrate with company policies that reflect your corporate culture.

While today’s rules combined with the expanded use of a mobile workforce present payroll tax compliance challenges there are cost effective solutions for employers to mitigate their compliance risk. Another key point is having a solution in place to track employees’ workdays can of course can enable compliance but it can also be proactively used to prevent that same compliance from being triggered.

Note: The Mobile Workforce State Income Tax Simplification Act of 2019 was reintroduced with bipartisan support last week with the aim to universally apply a 30-day taxing threshold for non-residents working outside of their home state. Similar legislation aimed at State Tax Simplification was introduced in 2007, 2009, 2015 and 2017.

income tax rates


View income tax rates in your state [pdf]

gary johnson

Gary Johnson

Crowe LLP  



What are foreign tax credits? - Dinesh Jangra, Crowe UK

For some, this is an area where just the mention of it can start to cause confusion. I am hoping therefore this is a useful write up. First of all, I will mention that often an abbreviated form - just FTC is used. Tax experts often refer to foreign tax credits as ‘FTCs.’

So what are FTCs and why do they occur?

When employees work across borders they may trigger taxation in more than one country – the home as well as the host country (for example). Let’s call home (Country A) and host (Country B). When taxation has been triggered in both countries income tax may become payable in both locations. It is not uncommon that one of the two countries (say Country B) taxes all of the income including the income taxed in Country A. In effect we have what is known as double taxation. Income tax is due on the same income in two different countries. Income tax is due in Country B on everything and in Country A as well (usually on a smaller portion of the income).

Double taxation, of course, would be unfair and would be very costly and demotivating to globally mobile employees. In a number of scenarios, such as where tax equalisation applies, the tax liabilities are transferred to the employer. This double taxation then becomes a potential cost to the employer.

Tax systems recognise that double taxation would be unfair. For example, if Country B charged tax of 25 on income of 50 and then Country A charged tax of 15 (on that same income of 50), then we have total tax of 40 or a tax rate of 80%. In response to this tax systems usually provide some mechanism to remedy this double taxation. One such mechanism is foreign tax credits. Where allowed, a country would compute the tax liability due but then give a “credit” for the tax paid in the other location.

Developing the example we had earlier:

  • Country B tax is 25
  • Country A tax is 15
  • Country B tax due is 10, (25 -15).

Country B has given a “foreign tax credit” so that the Country B tax due is reduced and double taxation is remedied. It’s not exactly this simple as the workings and calculations are significantly more complex and involved but this illustrates the point,.

Foreign tax credits are quite common in the area of mobility because often tax is driven by economic activity (as one example) and the employee is working in more than one country. Another cause can be compensation that is earned over multiple years – bonuses or equity compensation as examples. The employee may have worked in more than one country during the period to which these earnings relate so more than one country taxes and one of the countries taxes it all.

The double taxation issue can also be very relevant for payroll, after all no employer wants to pay payroll taxes on the same income in more than one country. Tax experts usually find ways of resolving this but it requires detailed knowledge of local and cross border payroll and mobility taxes.

In general, foreign tax credits are usually best left to be managed by tax experts as they can get complex quickly. That said, it is important for those working in the area of mobility to understand they exist. If you are told tax is due in more than one country on the same income, then a fair question is to check how is that resolved. Is a foreign tax credit available? If you are told that there are payroll obligations in two countries it is fair to ask if there are payroll taxes on the same income that will be costly for you as an employer. Again, a fair question is whether a foreign tax credit (or something similar) is available to resolve the double payroll tax?

The foreign tax credit is one of the ways in which double taxation is managed.

There are other methods – exemption for example, but this is not covered here.

Dinesh Jangra

Crowe LLP
United Kingdom 



What is a certificate of coverage? - Nupur Rishi , Crowe MacKay, Canada

Social security is part of the payroll obligations that an employer has and usually consists of an employee and employer component. Like taxes, social security rates differ by country. It’s also important to note that in some countries social security is closely connected to the concept of pension and other related benefits so the ability for the employee to continue to pay into their home country social security system can be a key (and sometimes even an emotive) issue.When an employee from one country is sent to work in another country their compensation can be subject to social security taxes in both countries – so social security is due in the home and the host country (a double cost to the employee and the employer). To eliminate these dual costs a number of countries have signed agreements referred to as social security 'totalisation' agreements. The agreements usually clarify in certain situations the single country in which social security is due and provide a mechanism through which payments made in one country can be recognised in the country.In most agreements, if an employee is sent to work by their employer in another country for up to five years and they continue to be legally employed by the home country employer then home country social security only can be due. 

There are a number of detailed considerations that also have to be checked and worked through. Once worked through, the employer and employee can then apply for a document called a Certificate of Coverage from the social security administration of the home country. This certificate of coverage serves as evidence that an employee, an employer, or even a self-employed worker is subject to home country social security and there is an exemption (in part or whole) from contributing to the social security system of the host country. From a payroll compliance perspective this document is absolutely key. The employer in the host country needs to be able to demonstrate the basis on which social security in the host country is not paid. Payroll audits by local tax/social security authorities often ask for copies of these certificates and in their absence can insist the host social security is paid (a double cost).Within Europe, the certificate of coverage concept is usually is governed as part of the European social security rules which can result in a different document called an A1. We will deal with this separately.


Nupir RishiNupur Rishi 
Crowe MacKay




What is tax protection? - Dinesh Jangra, Crowe UK

Tax protection is one of a few responses available to employers to help manage the challenge of differing tax and social security rates between countries. 

Different countries of course have different tax and social security rates so the net pay to the employee or assignees (after taxes) can change as they work in a new country. This change can become a barrier to mobility from an employee perspective as it adds complexity and uncertainty as well as changing net pay. We’ve discussed tax equalisation separately- this seeks to neutralise any differences – so the employee is no better or worse off. Tax protection, on the other hand, seeks to “protect” against any increases only. Consequently, the employee can therefore be better off, but should not be worse off (from a tax perspective)

For example, say the tax rate in the home country was 35% but it was 39% in the host country. In this case the employer would effectively settle the 4% extra tax under tax protection. Similarly, if the tax rate in the host was 29% then no employer assistance would be required.

This arrangement is usually deployed by employers where they recognise the tax differences issue, or there is double or multi-country taxation but they don't want apply a tax equalisation approach. In theory, it also allows the employee to benefit from any local country tax breaks which can be an incentive to take up the assignment. Usually, tax protection is part of a gross pay approach (so employee settles the taxes due) and then a reconciliation can be prepared to review if tax protection has in fact been triggered. Sometimes these reconciliations are prepared as standard each year and other employers prefer to have them prepared “on request” (employee has to request or they are prepared for certain employee categories only).  Whilst this approach may seem like it is “light touch” from an employer perspective my experience is it can actually get complex quickly. The tax is due by the employee so they usually become very focused on the amount and timing of taxes due in all locations to understand if they are worse off in any way. As a result, the requirement for line management /HR and expert support can increase.


Dinesh Jangra

Crowe LLP
United Kingdom 



What is tax equalisation? - Dinesh Jangra, Crowe UK

Different countries have different tax and social security rates. If an employer sends an employee overseas for a work assignment, the new work location may result in different tax rates being applied so the take home pay after taxes could be different.

The purpose of a tax equalisation approach is to neutralise this and ensure that the employee is no better or worse off from a taxes perspective.

The approach usually (but not always) applies to stay at home compensation only. Personal and non-company income is usually (but not always) outside this arrangement.

The administration of the process involves the deduction of an estimated notional/ hypothetical tax from the employee. The actual taxes payable on company compensation then become payable by the employer. The estimated notional/hypothetical tax is then reconciled each year. Tax equalisation approaches enable and promote employee mobility.

Dinesh Jangra

Crowe LLP
United Kingdom